RBI Study: Tomato, Onion, Potato Prices Drive India's Inflation Volatility

• A new RBI study reveals that sharp and recurring spikes in tomato, onion, and potato (TOP) prices are the primary source of volatility in India’s headline retail inflation.
• The paper, "Retail Inflation Volatility in India: Sources, Determinants, and Implications," highlights that much of the fluctuation in headline inflation stems from the vegetables sub-group, particularly TOP.
• Vegetables, along with pulses, spices, and edible oils, account for the largest price swings, with over 80% of headline inflation variation attributed to vegetable prices alone in 2025–26 (up to August).
• Commodity-specific shocks (onion in 2019–20, potato in 2020–21, tomato in 2022–25) linked to weather and supply bottlenecks amplify overall inflation due to price spillovers among vegetables.
• Supply-side interventions like buffer stock releases and export restrictions effectively contain inflation volatility and curb spillover effects, preventing persistent broad-based inflation despite shocks.